Question

Explain the difference between an auction with reserve and an auction without reserve. if not specified, which is the default form of auction?

How can an offeror revoke an offer?

Answer 1

An auction with reserve and auction without reserve are two types of auction that have so many differences between the two. The following are the main difference between these two terms,

a. Difference between An auction with reserve and auction without reserve:

• An auction with reserve: An auction with a reserve refers to the auction type where the seller reserve and fix one minimum price. If the bidding reaches to that reserve or fixes the minimum price, the seller will sell his product at that time only. In case the bidding is not reached to the minimum fix or reserve price, the seller will not have the obligation to sell his product in that auction. In this case, it is up to the seller if he wants to sell the product or not if he is not getting the minimum fix price. The auctioneer can withdraw the product if the seller is not getting the minimum price reserve for the auction.  

For example, a seller wants to sell a laptop in the auction. He reserves the price of USD 1000. In the auction, the auctioneer started the auction from $700 and the bidders made the price up to $900. The bidding price is not going more than $900. In this case, the auctioneer has the right to remove the laptop from the auction as the seller is not getting the minimum auction price of $1000.

• An auction without reserve: This is also known as Absolute Auction An auction without a reserve refers to the auction type in which the product will be sold to the highest bidder regardless of the price. In this case, the auctioneer will not have the right to withdraw the auction of the product. In this type of auction, the auctioneer will not set any reserve price so the product will be sold to the highest bidder in the auction.

b. An auction with reserve is assumed to default form of the auction unless the auction is advertised as auction with reserve or the absolute auction.

c. Revocation of offer: A revocation of offers refers to the withdrawal of a previously made offer to solve some legally binding issues in the contract. A previous offer could be any legally binding contract that the other party has accepted it.

A contract is revoked by the communication (in written form) of the revocation of the offer by one party to another. Before accepting the offer, the proposer party has to send a written notice to another party with the reasons for the revocation of the offer. An offer could be revoked in the below ways,

• By written communication: Any time before accepting the offer, the proposer has to send a notice communication of revocation to the other party.
• By lapse of acceptance time: Each proposal will have a prespecified time in which the other party can accept the offer. Once this time-lapse, the proposal would be revoked automatically.
• By the death of the proposer: A proposal could be revoked in case of death of the proposer if the death is known to the acceptor before accepting the offer.
• By non-fulfillment of certain conditions: A proposal would be revoked if certain conditions by the offeror are not accepted by the acceptor.
• By non-acceptance in the prescribed form: A proposal would be revoked once the offeree does not accept the mode of acceptance of the proposal suggested by the offeror.